Credit Traders Bolster Brexit Defenses as Leave Camp Pulls Ahead

Kate Linsell, Joe Mayese and Sally Bakewell, Bloomberg

Debt investors rushed to hedge against the risk that Britain votes to exit the European Union this week as polls show a departure has become a real possibility.

Credit derivatives trades on investment-grade debt in Europe already exceeded the average for a full day by 1 p.m. in London on Friday, according to data compiled by Bloomberg. Trading volumes across global credit-default swap benchmarks soared this week, sending up volatility and the cost to protect against losses.

Traders around the world are bracing for the result of the June 23 ballot on whether Britain should leave or remain in the 28-nation European Union. Global central banks including the U.S. Federal Reserve and the Bank of Japan joined the Bank of England in warning about disruptions to the global economy should Britain opt to depart the bloc as polls showed the “Leave” campaign pulling ahead.

“Many viewed Brexit as unlikely enough that they didn’t have to worry about it, and now they’re panicking to some degree,” said Gordon Shannon, a London-based portfolio manager at TwentyFour Asset Management, which oversees 6.4 billion pounds ($9.1 billion) of assets. “People are putting on last-minute hedges.” Read more